Key Points
- Zimbabwe’s creditors may consider a debt-for-climate swap in restructuring $21 billion arrears.
- The government needs to commit to structural reforms to secure creditor support.
- Similar debt instruments have been implemented in other nations, leading to significant debt relief.
Zimbabwe’s creditors may be willing to consider a debt-for-climate swap with the nation as part of a restructure of its $21 billion arrears.
Interactions with the nation’s different development partners indicate that it is “an option that they are willing to consider,” Raul Fernandez, the United Nations Development Program project manager for climate development framework told delegates Monday at an economic summit hosted by the country’s Treasury in the resort city of Victoria Falls.
“They need to see also some action from the government, this commitment to structural reforms,” he said. “There is that willingness, they have this on their radar, this option.”
Innovative financial instruments known as debt swaps, like those for climate and nature, erase part of a developing nation’s external liabilities in return for pledges to fund initiatives related to climate or marine conservation.
The mechanism of debt-for-climate swaps
According to a report by New Zimbabwe, Fernandez stated that similar instruments have been implemented in Ecuador, Gabon, Barbados, Belize, and Belize.
“it can lead to substantial debt reduction.” “It may, in certain circumstances, result in better payment terms” he added.
Zimbabwe’s debt and restructuring efforts
Zimbabwe’s debt default in 1999 resulted in its exclusion from global finance markets. Interest costs have exploded since the company is unable to pay its debts.
Interest costs have exploded since the company is unable to pay its debts. In order to spearhead restructuring negotiations with creditors, it asked former Mozambican leader Joaquim Chissano and African Development Bank president Akinwumi Adesina for assistance in 2022.
The Paris Club, World Bank, European Investment Bank, and African Development Bank are among the country’s creditors.
Questions posed to Mthuli Ncube, the minister of finance, on his cell phone after hours were not immediately answered.
